ACS revenue down after merger, service segments increase

Alaska Communications Systems Group Inc. announced a decrease in revenue for the first quarter, largely driven by changes from the new Alaska Wireless Network.

ACS had $78.3 million in total revenue for the first quarter of 2013, down $12.7 million compared to the same quarter of 2013. That’s because $15.7 million in revenue was shifted to the Alaska Wireless Network, including roaming.

The results were announced May 8, and the company held its quarterly investor call May 9.

ACS and General Communications Inc., or GCI, merged their infrastructure into the Alaska Wireless Network in July 2013, although they still sell separate retail products. The merger has continued to affect the two companies’ bottom lines.

Alaska Communications’ total service and other revenue, however, grew $3.8 million or 7.7 percent, compared to the prior quarter. Chief Financial Officer Wayne Graham said during an investor call May 9 that the increase was driven by strong performance, the TekMate acquisition and the release of about $1 million in revenue reserve due to certain regulatory-based revenue streams.

The company also reported a reduction in net income for the first quarter of 2014 compared to the final quarter of 2013. First quarter 2014 net income was a loss of $385,000 compared to net income of $3.4 million for the first quarter of 2013.

Year-over-year, the company’s revenue for each business line looked stronger.

Business and wholesale service revenue was $26.4 million, up 17.1 percent compared to the first quarter of 2013. Consumer service revenue was $10.2 million, up 1.9 percent, driven by an 11.8 percent increase in broadband revenue.

Wireless revenue at $19.4 million, however, was down, as a result of the AWN merger.

The Alaska Communications stock price was $1.89 at the close of the market May 12, up from the week prior, and up from May 13, 2013 when it was $1.71, but below the 52-week high of $3.90, and less than the $2.67 it was July 23, 2013, when the AWN transaction closed.

ACS President and CEO Anand Vadapalli said the first quarter results set the foundation and pace of performance that can be expected from the company.

The company also started 2014 with some changes to subscriber metrics.

Broadband connections increased sequentially, with about 19 additional business broadband connections and 801 new consumer broadband connections.

Wireless subscribers, however, decreased compared to the prior quarter by 873 to 107,975.

Alaska Communications has also continued its effort to pay down its debt this year. Graham said that in the first quarter, the company made more than $13 million in early debt payments, with another $5 million so far in the second quarter of 2014.

Efforts to expand business continue

Vadapalli said during the call that other efforts to grow and expand at ACS are doing well.

The company’s purchase of TekMate, an Alaska information technology company, closed in the first quarter.

“The first few months of operating results have been stellar,” Vadapalli said. “Sales are exceeding our expectations, creating opportunities for us to sell higher margin connectivity products.”

Graham said the transaction contributed about $1 million in increased service revenue. This year, the acquisition is expected to provide $5 million to $7 million in revenue, Graham said in March.

Vadpalli also announced a partnership with the Anchorage School District that was developed during the first quarter.

ACS will invest in fiber to nearly 100 schools in the district, enhancing service at those schools as well as in nearby neighborhoods, according to Vadapalli.

ACS is also competing for additional wireless backhaul revenue, according to Vadapalli.

Although when AWN closed, the company transferred its backhaul to the new network, it has re-entered that market and is now competing for customers, Vadapalli said.

ACS is also continuing to work to manage expenses, Vadapalli said.

 FCC changes

In late April, the Federal Communications Commission announced certain Universal Service Fund changes, but those largely won’t impact ACS.

ACS spokeswoman Heather Cavanaugh wrote in an email that as Alaska’s only price-cap carrier, ACS is not impacted by the quantile regression analysis formula, so removing it won’t affect the company. The safety net additive also only impacts rate of return carriers.

Those two changes were praised by others in Alaska.

However, the company is still concerned about remaining components of the 2011 order, Cavanaugh wrote in an email.

“We are concerned about the FCC’s plans to reduce support for maintaining and operating the network,” Cavanaugh wrote. “We are concerned the consequences will lead to reductions in services across Alaska.”

11/21/2016 - 1:03pm